California Supreme Court Upholds Keeping Gig Drivers as Independent Contractors

The California Supreme Court on Thursday upheld a law that allows app-based rideshare and delivery companies to treat their drivers as independent contractors instead of employees, handing a victory to the companies that put the initiative on the ballot in 2020.

The justices’ unanimous decision focused on a clause in the industry-backed Proposition 22 that excluded app-based drivers from the state workers’ compensation system. The court declined to invalidate the law over a challenge brought by four drivers and the Service Employees International Union, which argued that Prop. 22 conflicted with the state Legislature’s constitutional powers to set those benefits.

The court found that the Legislature does not have the sole authority to govern the workers’ compensation system. The law “does not preclude the electorate from exercising its initiative power to legislate on matters affecting workers’ compensation,” Justice Goodwin Liu wrote in the ruling.

Uber, Lyft and Doordash, among other companies, spent more than $200 million to back Prop. 22, which was approved by 59% of voters in November 2020. The ballot initiative was in response to AB 5, a state law that made it more difficult to classify drivers as independent contractors.

Independent contractors are much cheaper for employers because they generally lack workers’ compensation coverage if injured on the job, overtime pay, and other protections afforded to employees. In the state, there are an estimated 1.4 million drivers working for DoorDash, Instacart, Lyft and Uber.

“California’s Supreme Court erred today by siding with multi-billion dollar corporations’ efforts to write their own laws to put profits over people,” Assemblymember Liz Ortega (D-San Leandro), who chairs the Assembly Labor Committee, said in a statement. “Being injured on the job shouldn’t mean that you and your family are placed in financial jeopardy, but that’s what workers face when corporations misclassify them to avoid employers’ responsibilities like workers’ compensation.”

Rory Little, a professor at UC Law San Francisco, told KQED that the ruling represents a big win for backers of Prop. 22, but it’s “not the end of the story.”

“This is a hot button issue. Not just in California, but all around the country,” he continued. “And so there’s going to be legislative efforts to address this further.”

Minutes after the court decision, Instacart applauded it as a “historic moment,” while Uber called it a “victory for drivers and democracy,” noting that 10 million voters supported Prop. 22.

“Whether drivers or couriers choose to earn just a few hours a week or more, their freedom to work when and how they want is now firmly etched into California law, putting an end to misguided attempts to force them into an employment model that they overwhelmingly do not want,” Uber said in a statement posted on its website.

The justices’ ruling on Thursday did not address a clause in Proposition 22 that makes it all but impossible for lawmakers to change the law by requiring a seven-eighths supermajority vote for amendments.

KQED’s Rachael Myrow contributed to this report. This is a developing story, and it will be updated.